Need to file state taxes when you live and work in different states?
Most people in the U.S. live and work in the same state, which makes state taxes pretty easy to understand – you pay taxes to the state where you live and work.
But what if you live in one state and work in another? Do you pay taxes to the state where you live? Where you earn an income? Both?!
You need to pay taxes to both. Most likely you will end up having to file a resident return in the state where you live and a nonresident return in the state where you work.
Resident return
Generally you need to file a resident return in the state where you are a permanent resident. This state has the right to tax ALL of your income, wherever it was earned.
Nonresident return
After you file your resident return in your home state, you then need to go about filing a nonresident return in every other state where you earned money. A nonresident return only taxes you on the money you earned in that state. What often happens is that you withhold some income for each state tax.
Let’s take a real-world example.
Let’s say you live in New Jersey and commute to your NYC job Monday through Friday. Come tax time, you would need to file a resident return in NJ (reporting all of your income) and a nonresident return in NY (reporting only the income you earned in NY).
Worried about being double-taxed? Don’t be. You will have an opportunity to claim a credit for taxes paid to the nonresident state. They will then divide whatever has been withheld between them and the state whose tax liability was not exactly met will either give you a refund or a tax bill.
States without an income tax
There’s always an exception to the rule. In this case, there are seven exceptions. The five states with no income tax and the two states that only tax interest and dividends are the exclusions:
- Alaska
- Florida
- Nevada
- South Dakota
- Texas
- Washington
- Wyoming
- Tennessee
- New Hampshire
If you live in one of these states, you don’t need to file a resident return (unless you live in TN or NH and have interest and dividends income). But if you work in a state that does have an income tax you have to file a nonresident return in that state.
The same holds true when the situation is reversed. If you live in a state with an income tax, you must file a resident return there. But if you work in a state without an income tax, you don’t have to worry about filing a nonresident return.
Sound complicated? There’s a reason for that: it is. But let’s not stress because here’s all you really need to know. For this to work, every state needs to make agreements with every other state covering the income they could both theoretically tax. These agreements are structured to generate a minimum amount of paperwork and special cases: instead of having some workers who lives in a state but doesn’t pay taxes, the states have someone who lives in the state and pays taxes like everyone else — but gets a special tax credit at the end of the year.
In a situation like this, it’s often best to talk to your payroll department about how to proceed. In places with many out-of-state commuters (like New York, New Jersey, and Connecticut, as well as cities near state borders), they will have the details on how each state treats out-of-state income.
Even if you have to file multiple state tax returns you can take care of them right here on RapidTax.
I lived and worked in Texas for 6 months of the year and moved to NJ and i’m jobless so I earned nothing in NJ. where do i file???
Hi Matt,
Although you earned an income in Texas, you are not required to file a state tax return there since it is an income tax free state. You will need to file a federal tax return. You will report all income on your federal return regardless of which state it was earned in.
Hi,
I lived in Florida and in 08′ and 09′. I went to NC to do a couple of construction jobs (small), and earned about $5,000 each winter. I filed in Florida and a couple of years later received a NC tax bill for $1250.00 each year and was told they estimated the tax from prior years when I lived there. It is now $384 in 08′ and $1,250 in 09′. I keep getting different numbers and reasons as well as interest. I don’t know what to do or who to contact since NC is running me around. I’ve been told I did not file in Florida so I need to file a NC state return. I am a disabled vet and federally disabled now. They won’t even work with me. I also had Federal tax fraud and sent them the proof thinking someone filed in NC to illegally receive a refund and they said that was false, my IRS fraud report. It’s insane when I’m truthful and still being slammed. Any advice?
Hi Anthony,
When filing state tax returns, you’ll generally be responsible for taxes in the state you reside and physically work. In your case, Florida is income tax-free so you will not need to file a state tax return there. Since you worked in NC for the smaller construction jobs, you would be responsible for taxes there but only for the time you were working in the state. Although overwhelming, the first step is to get in contact with someone associated with the letter or documentation you are receiving about this money owed to NC. If you are still given the run-around, I suggest speaking with someone in a higher position who can assist you. You want to confirm that this is accurate information you are receiving and if you are being given different amounts owed, it will be impossible to pay back any tax debt in the first place.
I’m sure my scenerio has been asked, but there are entirely too many comments to scroll through. So, I figured I’d just ask and hope I can get help!
My situation:
Washington state (no state tax)
Worked home depot from 01/01/15 – 04/23/15 (did that for 8 years, but this is for this year’s )
Went on to Lowes 04/27/15 – 10/26/15
Started @ Lowes in Alabama 11/9/15 – present.
Since I stayed with the same company it doesn’t differentiate what I made in Washington State vs what I made in Alabama (big hourly pay difference).
Is everything done all in one tax return and then I just add in the state tax from Alabama? (Meaning all my income throughout the year is filed in my resident state (Alabama). All this “file in 2 different states” is confusing me because i always thought multiple tax returns couldn’t be filed under the same social #…is it literally 2 filings or is it just itemized as 2 states on 1 return? Please thank you!
Hi Christina,
I’m happy to help instead of you having to sift through the plethora of comments!
A taxpayer can only file one federal tax return and one tax return per state. A federal tax return reports ALL income earned and withheld, regardless of which state it was earned in. When it comes to state tax returns, they are sorted as resident state returns, non-resident state returns, and part-year state returns. One or more of these will need to be filed for the state that fits your specific tax situation but only one of the three per state can be filed and accepted.
In your case, you would file a federal tax return reporting all of your income earned for the tax year. You would also need to file a part-year resident state tax return for Alabama (in future years, you will need to file a resident state tax return for Alabama if you live there for the entire tax year). Your W-2 form should have been completed to show you two different totals per state. I suggest speaking with your payroll department about providing you with the specific amounts. Otherwise, your refund amount may be inaccurate.
i lived and worked in Florida for 9 months of the year and moved to California and working for the last 3 where do i file???
Hi Amber,
You will need to file a part-year resident state tax return for California along with your federal tax return to the IRS. Your income earned and tax withheld will be reported for CA on this tax return. Florida is an income-tax-free state so you are not required to file a state tax return for the time you worked and lived there. However, ALL income is reported on your federal tax return.
Hi,
I live in New Hampshire (NH) and work in Massachusetts (MA). I know that i will have to file as a non-resident in MA so that MA will only tax my income. That’s great but will I be able to get my taxes back as I’m a resident of NH where there isn’t income tax? Will this income tax or a percentage of my income tax be returned to me in a refund?
I appreciate your input.
Hello,
Although it benefits you to live in an income tax-free state, you are still responsible for Massachusetts state income taxes because you physically work there. Sometimes, two neighboring states will decide on a reciprocity agreement which allows you to essentially only pay taxes to one state. However, New Hampshire doesn’t tax you on income, so they cannot issue you a credit for the income taxes you’ll pay to Massachusetts. You will need to file a Massachusetts non-resident state tax return.